Competition

Efficient market: A market that allocates funds to their most productive uses due to Competition among wealth-maximizing investors; it determines and publicizes prices that are believed to be close to their true or intrinsic value (inherent worth). It is an assumed perfect market in which there are many small invewstors, each having the same information and expectations with respect to securities; there are no restrictions on investment, no taxes, and no transaction costs; and all investors are rational, view securities similarly, and are risk-averse, preferring higher returns and lower risk.

Efficient market hypothesis: In general the hypothesis states that all relevant information is fully and immediately reflected in a security's market price thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all publicly available information) and strong form (stock prices reflect all relevant information including insider information).Theory describing the behaviour of an assumed perfect market in which securities are typically in equilibrium, security prices fully reflect all public information available and react swiftly to new information, and, since stocks are fairly priced, investors need not waste time looking for mispriced securities. A market that allocates funds to their most productive uses as a result of Competition among wealth-maximizing investors that determines and publicizes prices that are believed to be close to their true value. An assumed perfect market in which there are many small investors, each having the same information and expectations with respect to securities; there are no restrictions on investment, no taxes, and no transaction costs; and all investors are rational, they view securities similarly, and they are risk-averse, preferring higher returns and lower risk.

Intermarket trading system: Is the network which links the trading floors of several registered exchanges. It encourages Competition in issues listed on the American or New York Stock Exchanges with the other participating regional exchanges. The competitive edge occurs if there is a better price out in the network than on a particular exchange. If so, then a broker or market maker can execute at that better price.

Market efficiency hypotheses: Refer to theories which try to explain financial market behavior. Some hypotheses state that the markets are rigorously efficient and operate by an immediate discounting of perfect information. Other theories state that the markets are relatively inefficient, particularly when socially-oriented goals are also to be considered. Other hypotheses state that information is good or even very good but not perfect. Also, not all market participants believe or simultaneously act on new data or information. The latter theorists believe that the markets try to attain pure efficiency. However, they also recognize that Competition breeds asymmetrical change and this influences the discounting and adaption processes. A simple example will highlight this view. While improvements in technology are reducing costs and communication times, not everyone updates their systems given each and every change in chip speeds and processing power. To do so would be too expensive and this creates one of example of a marketplace paradox.

Open market purchase operation: A systematic program of repurchasing shares of stock in market transactions at current market prices, in Competition with other prospective investors.

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